China Eximbank, CDB, and ICBC provide $2.576 billion syndicated loan for 767 km Ethiopia–Djibouti Gas Pipeline Construction Project (Linked to Project ID#87034 and #69487)

In 2018, China Eximbank, China Development Bank, and Industrial and Commercial Bank of China provided a $2.576 billion syndicated loan to POLY-GCL Petroleum Group Holdings Limited [保利协鑫石油天然气集团控股有限公司 or 协鑫（集团）控股有限公司] — a special purpose vehicle that is jointly owned by the state-owned China Poly Group Corporation and the closely held Hong Kong-based Golden Concord Group Limited (GCL) — for the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project. The total cost of the project is $3.68 billion and it is being financed according to a debt-to-equity ratio of 70:30. The borrowing terms of the syndicated loan are unknown. The purpose of the project is to construct a 767 km pipeline to transport recently discovered natural gas from landlocked Ethiopia to the Djibouti Port along the Red Sea. The pipeline will run from the Hilala gas field and Calub gas field in Ethiopia’s Somali region to Damerdjog in Djibouti’s Arta region. Upon completion, the pipeline is expected to be able to transport up to 12 billion cubic meters of natural gas a year. The project also involves the construction of an LNG plant in Damerdjog, Djibouti (exact locational coordinates: 11.482124, 43.186891). The development and implementation of the project have unfolded according to the following timeline: On November 16, 2013, POLY-GCL Petroleum Group Holdings Limited signed a Petroleum Production Sharing Agreement with the Ministry of Mines of Ethiopia. On January 7, 2014, POLY-GCL Petroleum Group Holdings Limited signed a cooperation framework agreement with the Ministry of Energy and Natural Resources of Djibouti. On July 17, 2014, POLY-GCL Petroleum Group Holdings Limited signed a memorandum of cooperation with China Petroleum Pipeline Bureau (a subsidiary of CNPC). On July 9, 2015, the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project was listed in the Belt and Road Initiative project reserve pool. On September 4, 2015, Chairman of GCL-Poly Natural Gas Group (Poly-GCL Petroleum Group) Yu Baodong and the then Minister of Mines of Ethiopia H.E. Tolesa Shagi signed a Pipeline Framework Agreement at the Great Hall of the People in Beijing, witnessed by both prime ministers of China and Ethiopia. On September 8, 2015, the spud-in ceremony of the first well Calub-11 of POLY-GCL Petroleum Group Holdings Limited was held successfully at Calub well site. On March 3, 2016, a foundation stone laying ceremony for POLY-GCL Petroleum Group Holdings Limited’s construction of the LNG plant in Djibouti was held. On April 19, 2016, the installation of pilot production equipment for Calub-11 well was completed successfully and the well test and pilot production were formally launched. In October 2016, the project was included in the list of the Planned Major Energy Projects of the Belt and Road Initiative Cooperation 2016 issued by the National Development and Reform Commission. On December 21, 2016, POLY-GCL Petroleum Group Holdings Limited and China-Africa Capacity Cooperation Fund formally signed a subscription and shareholder’s agreement for the project. China-Africa Capacity Cooperation Fund agreed to make a $200 million equity investment in the project. In January 2017, the Department of Foreign Capital under China’s National Development and Reform Commission issued a support letter to include the project in a list of the first batch of China-Ethiopia production capacity cooperation projects. On April 6, 2017, the chairman of POLY-GCL, Yu Baodong and the deputy director of the Project Appraisal Department I of China Development Bank discussed the development of the Ethiopia-Djibouti oil & gas project and matters related to financing. On April 6, 2017, Yu Baodong, Chairman of GCL-Poly Natural Gas Group, discussed the development of the Ethiopia-Djibouti oil and gas project and financing cooperation with China Development Bank, and signed a $3 billion project financial advisory agreement. Then, from May 14, 2017, to May 15, 2017, Chairman of GCL-Poly Energy Holdings Zhu Gongshan attended the Forum on the Belt and Road Initiative Cooperation held in Beijing and POLY-GCL Petroleum Group Holdings Limited was successfully included in the list of Forum companies. On September 2, 2017, the first horizontal well Calub-CH1 was spud in. On November 15, 2017, POLY-GCL Petroleum Group Holdings Limited and Djiboutian government signed an MOU related to the commercial terms of the Djibouti pipeline and LNG investment agreement. On January 16, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan held talks with the prime minister of Ethiopia, Hailemariam Desalegn and signed a pipeline development agreement. One day later, on January 17, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan led a delegation to visit and negotiate with the president of Ethiopia Mulatu Teshome on how to jointly promote the development of the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project. On January 22, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan led a delegation to meet the president of the Republic of Djibouti, Ismail Omar Guelleh and both parties agreed to strengthen the strategic cooperation in the energy sector and actively implemented a number of consensuses reached by the presidents of the two countries during their meeting in Beijing in November. On March 23, 2018, the “POLY-GCL well logging support center” set up by POLY-GCL was formally established by the CNPC Logging Company. On March 31, 2018, a BGP reserve and valuation report was completed. On May 8, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan led a delegation to visit the Ministry of Mines of Ethiopia and held talks with the newly appointed minister Meles Alemu to discuss topics relating to the rapid and sound development of the POLY-GCL oil and gas project. On May 13, 2018, the President of Djibouti Ismail Omar Guelleh met the Chairman of GCL-Poly Energy Holdings Zhu Gongshan at the Office of the President, and both parties conducted a comprehensive discussion on a package of cooperation projects in energy production and application sectors in Djibouti and signed gas pipeline project development agreement. On June 28, 2018, a production ceremony for the crude oil pilot production project of POLY-GCL was held and the first barrel of crude oil in Ethiopia was produced successfully. On July 4, 2018, the project achieved the export of its first truck of crude oil. On September 1, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan met with Melese Alemu, the Minister of the Ethiopian Ministry of Mines and Petroleum in Beijing. One day later, on September 2, 2018, Chairman of GCL-Poly Energy Holdings Zhu Gongshan met with Dr. Yinager Dessie, the Governor of Ethiopian National Bank. Two days later, on September 4, 2018, President Guelleh of the Republic of Djibouti, who came to China to attend the 2018 China-Africa Cooperation Forum, met with the Chairman of GCL-Poly Energy Holdings Zhu Gongshan in Beijing. The two parties held in-depth discussions about the project. On September 6, 2018, POLY-GCL Petroleum Group Holdings Limited awarded a $313 million, two-year contract to China Oil HBP Group for taking charge of surface construction at the Calub and Hilala gas fields in Ogaden basin and and build long-distance gas pipelines to support the project. Then, on October 19, 2018, the President of POLY-GCL Petroleum Group Holdings Limited, CHEN Lei, led a delegation to meet the team of the National Bank of Ethiopia and held beneficial discussions with representatives of the China Development Bank, the Ministry of Mines and Petroleum of Ethiopia and the Ethiopian National Bank. On January 12, 2019, the Industry Development and Operation Alliance Conference of China Communications Construction Company was held in Nanjing. Mr. Yu Baodong, Executive Director of GCL Group and Chairman of Poly GCL Petroleum Group, was invited to attend the first meeting of the General Assembly and the Summit Forum on Industry and Finance, and exchanged cooperation agreements with Mr. DU Nan, General Manager of CCCC Industry Investment Holdings Co., Ltd., on the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project and near-shore natural gas liquefaction and terminal projects. On February 15, 2019, the Government of Ethiopia and the Government of Djibouti formally signed an agreement on the Natural Gas Transit Pipeline between the Federal Democratic Republic of Ethiopia and the Republic of Djibouti, which provides an important backup for the Ethiopia-Djibouti Natural Gas project of the Poly GCL Gas Group. On June 24, 2019, YU Baodong, Chairman of Poly GCL Petroleum Group Holdings Co., Ltd., and DU Nan, General Manager of CCCC Industrial Investment Holdings Co., Ltd., went to Hangzhou to visit the headquarter of Zhejiang Energy Group Co., Ltd., where they met with CHAI Xiqiang, the Deputy Chief Engineer and Deputy Director of global business of Zhejiang Energy Group and CHEN Yiqin, the Chairman of Zhejiang Energy International Company. They signed a letter of intent for equity investment and LNG purchase for the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project. Ethiopia's Parliament then approved the pipeline's construction in December 2019. On December 27, 2019, Ethiopian Finance Minister Ahmed Shide and the Ethiopian Ambassador to China visited the Beijing office of Poly GCL Petroleum Group. YU Baodong, Chairman of Poly GCL Petroleum Group, received the delegation of ministers and the two sides exchanged views on steadily promoting the construction of the pipeline. On January 2, 2020, China National Oil and Gas Exploration and Development LTD Corporation (CNODC), its African Project Department and the Exploration and Development Research Institute visited the Beijing office of Poly GCL Petroleum Group to get an update on the project. One week later, on January 9, 2020, the Liquefied Natural Gas (LNG) project in Yantai Port West Port Area was approved by the National Development and Reform Commission as an extension of the 767 km Ethiopia–Djibouti Gas Pipeline Construction Project. On February 12, 2020, the General Manager of the Iraq Branch of the Xinjiang Petroleum Administration of PetroChina, Hehman Yimiti, Assistant General Manager Zuo Jianbo and geological expert Du Yang visited the Ethiopian branch of Poly GCL Petroleum Group. The two sides reached a preliminary intention to operate and manage the Ethiopia-Djibouti natural gas project of PetroChina Xinjiang. On March 30, 2020, Poly GCL Petroleum Group signed an Operation and Management Agreement for the Ethiopian oil and gas field with PetroChina's Xinjiang Oilfield Company. On April 14, 2020, the first session of the second Board meeting of Shandong Poly-GCL Pan-Asia International Energy (Shandong) Co., Ltd. was successfully held in Yantai. On the afternoon of April 24, 2020 ( Ethiopian time), Poly-GCL Petroleum Investments Co., Ltd. and the Ethiopian Ministry of Mines signed the Gas Commercialization Agreement ("GCA") in Addis Ababa, the capital of Ethiopia. On May 27, 2020, PetroChina Xinjiang Oilfield and its professional company visited Poly-GCL Petroleum Group. ZHOU Gan, CEO of Poly-GCL Petroleum Group, with the company's technical professionals from exploration and development, drilling and surface engineering departments, received the delegation. The two sides conducted professional exchanges on exploration, crude oil testing, oil field technical services, oil and gas field operation and maintenance management. On May 31, 2020, GCL Group consolidated overseas and domestic natural gas segments and established GCL Natural Gas Group. On June 1, 2020, GCL Natural Gas Group held its first leadership meeting in Beijing. The meeting was chaired by WANG Lin, chairman of GCL Natural Gas Group, and attended by all senior management of the company. On June 2, 2020, ZHANG Lei, Deputy General Manager of Zhuhai Cold Energy Utilization Company of CNOOC Energy Development Co., Ltd led a team to visit the Beijing office of Poly-GCL Petroleum Group to exchange views with ZHOU Gan, CEO of Poly-GCL Petroleum Group, on cooperation in cold energy utilization. On the morning of June 4, 2020 (Ethiopian time), Poly-GCL Petroleum Investments Co., Ltd. and Ethiopia Minerals, Petroleum and Biofuels Corporation, Ethiopian Ministry of Mines Representative company, signed the Joint Operating Agreement (JOA) in Addis Ababa, Ethiopia. On July 16, 2020, an external panel review of GCL Natural Gas Group's Ethiopia-Djibouti natural gas project development plan was held in the Beijing office. The next day, on July 17, 2020, representatives of Beijing Guolian Energy Industrial Investment Fund and the China Agricultural Reclamation Industry Development Fund visited the Suzhou GCL Energy Center, where ZHU Gongshan, Chairman of GCL Group, met with visiting delegation. On the morning of August 20, 2020 (Ethiopia time), the first meeting of the Ministerial Steering Committee on the Ethiopian Natural Gas Project was held at the Ministry of Finance of Ethiopia. The meeting was chaired by Finance Minister Ahmed Shide, and Poly-GCL Petroleum Group Chairman Barton Yu participated through video connection. On September 14, 2020, WANG Yuanhong, Deputy Manager of the Oilfield Technical Services Branch of Xinjiang Oilfield Company, and WANG Yang, Vice President of kramay Zhongshida Joint Oil and Gas Science and Technology Research Institute, led a team of leading experts to visit the Beijing office of Poly-GCL Petroleum Group. As of September 2021, there was no evidence that construction had begun on the pipeline. This implementation delay was reportedly related to political and security risks to the oil and gas sector in the region. POLY-GCL Petroleum Group Holdings Limited is expecting to generate $1 billion of revenue in gas exports during the pipeline’s first operational year, due to the discovery of 7 to 8 billion cubic trillion feet (TFC) of natural gas in Ethiopia's Somali regional state. The Ethiopian Government expects that production will commence in 2023.

Additional details

1. This project is also known as the Poly-GCL Oil and Gas Project, the Ethiopia-Djibouti Oil & Gas Project, the Ethiopia-Djibouti Natural Gas Project, and the Ogaden–Djibouti Pipeline Construction Project. The Chinese project title is 保利协鑫埃塞俄比亚-吉布提石油天然气项目 or 的保利协鑫埃塞俄比亚-吉布提石油天然气项目 or 协鑫埃塞俄比亚-吉布提石油天然气项目 or 埃吉油气项目 or 就埃塞-吉布提油气项目. 2. AidData has estimated the face value of the loan (i.e. transaction amount) by taking 70% of the total project cost ($3.68 billion). 3. POLY-GCL Petroleum Group Holdings Limited [保利协鑫石油天然气集团控股有限公司 or 协鑫（集团）控股有限公司] was legally incorporated on November 7, 2012. Some sources suggest that the Ethiopian Government holds (or held) a 15% ownership stake in POLY-GCL Petroleum Group Holdings Limited. However, most sources identify POLY-GCL Petroleum Group Holdings Limited as a joint venture of China Poly Group Corporation and Golden Concord Group Limited (GCL). 4. According to a letter issued by Ethiopia’s Office of the Prime Minister on June 5, 2019, Ethiopia’s Prime Minister Abiy Ahmed lifted restrictions imposed by the National Bank of Ethiopia compelling international oil and gas companies to hold a local foreign currency account. The condition was the major hurdle that restricted the country from getting foreign direct investments in the oil and mining sector, according to Samuel Urkato (PhD), minister of Mines & Petroleum. "Many companies that want to invest in the country have backed off due to this restraint," Samuel told Fortune. The new decision was passed after having a serious debate with the officials of the National Bank of Ethiopia,” Samuel said. The companies were also frustrated by the directive, which limited them from obtaining loans from international creditors. “Since international creditors require the forex account of borrowers as a requirement for loan approval, the companies, especially Poly-GCL, have been continuously calling for the reversal of the directive," said Samuel. Poly GCL, which discovered crude oil reserves in three wells in the Hilala region and launched test production in June 2018, has been filing complaint letters with the government for the past two years. The companies have been transferring foreign currency into their local accounts to finance their oil and gas exploration activities and withdrawing cash in local currency for their expenditures.

Number of official sources

15

Number of total sources

36